Interpretation Of An Insurance Contract Must Adhere To The Specific Terms Stipulated In The Contract: NCDRC

Contentions of the Complainant

The complainant had availed a shop insurance policy from New India Assurance Company. A fire broke out in their store due to an electrical issue, causing damage to vehicle spare parts and accessories. The fire department was called, a police report was filed, and the total loss was stipulated to be Rs.21,31,636.61. The insurer appointed a surveyor to assess the damage, but the claim was rejected, stating that only motorcycles and accessories were covered, not the spare parts affected by the fire. The complainant provided all necessary documents except for the stock register, which was damaged. Instead, a statement from the parts supplier was submitted. The insurer rejected the claim, citing incomplete formalities and non-submission of documents. The complainant learned through the RTI Act that the surveyor assessed the loss at Rs.13,49,966 after deductions. The insurer claimed that the complainant failed to segregate the stock for physical verification, while the photographs by the surveyor indicated that small-sized spare parts were mixed and certain destroyed items, rendering segregation impossible. The complainant filed a consumer complaint in the State Commission of Punjab, seeking Rs.13,49,966 along with interest, harassment compensation of Rs.5,00,000, and litigation costs of Rs.1,50,000. The state commission rejected the complaint, stating that the insurer was not obligated to pay for the uninsured loss. The complainant has filed a revision petition in the National Commission to get the requisite relief.

Contentions of the Opposite Party

The insurer argued that the State Commission correctly accepted that the policy specifically covered motorcycles and accessories, excluding spare parts. They emphasized that spare parts, although necessary for vehicle functioning, are distinct from accessories, which are additional features not crucial for operation. The insurer contended that the spare parts and consumables claim was not payable as they were not covered under the policy. Furthermore, the insuerer opposed the complainant's attempt to change the scope of the insurance contract and policy description. They argued that any policy description errors should have been addressed during policy issuance or renewal. Additionally, they disputed the report's credibility from the independent surveyor, stating that it did not qualify as an assessment report and was obtained much later than the loss incident. The insurer asserted that there were no valid reasons to challenge the State Commission's well-reasoned order

Observations by the Commission

The commission focused on determining if the complainant's insurance policy covered the loss of spare parts and consumables on their premises. The main question was whether these items fell within the policy's coverage of “stocks of motorcycles and accessories.” The dispute centered around whether the insurer should compensate for the loss of spare parts and consumables not explicitly listed under the policy's description. The commission observed that various insurance products are available in the market, covering aspects like life, health, motor vehicles, properties, crops, and more, and each policy has specific coverage, terms, and conditions outlined in the contract. According to established legal principles, the terms of an insurance contract are binding, and interpretation must adhere to the specific terms stipulated in the contract, and any attempt to expand or reinterpret beyond the agreed terms is not permissible under the law, as it would amount to reframing the terms and conditions. Furthermore, the commission observed that in the present case, it is evident from the available evidence that the complainant claimed a loss due to the fire, specifically mentioning spare parts and engine oil, amounting to Rs.21,31,636.61. The insurer maintains a consistent stance, asserting that the complainant's insurance only covers motorcycles and accessories, with no spare parts or engine oil coverage. It is evident from the facts that accessories are additional items meant for adorning vehicles and are not essential components. The separately stored engine oil is not considered part of the motorcycles and accessories category. Therefore, the complainant's loss is limited to spare parts and engine oil, which were not covered by the insurance contract. Consequently, the insurer rightfully rejected the complainant's claim.

The commission dismissed the revision petition and upheld the state commission's order, stating that no illegality was mentioned in the repudiation letter issued by the insurer and the complainant is not allowed any relief.